Mark Leonard, the notoriously media-shy founder of Constellation Software Inc., resigned as president of the Toronto-based tech juggernaut on Thursday due to health reasons, the firm said. Chief operating officer Mark Miller was promoted to president and Leonard will stay on as board member, Constellation said. Who is Leonard, the man behind one of the world’s top tech portfolios who is sometimes likened to Warren Buffett? Here, Financial Post delves into Leonard’s background, what Constellation does and how his departure could affect the company.

Who is Mark Leonard?

Constellation’s reclusive, sixty-something founder, who shuns interviews and isn’t active on social media, appears in rare photos as a tall, bespectacled man with an enormous, wizard-like beard.

He has been compared to legendary investor Warren Buffett thanks to his long-term hold strategy and sustainable profits.

Before founding Constellation in 1995, Leonard worked in the venture capital industry for more than a decade. He received a Bachelor of Science from the University of Guelph and a Master of Business Administration from the University of Western Ontario.

He built Constellation into a global company with six units and a portfolio of hundreds of companies, which operates in more more than 100 markets and generates consolidated revenues more than US$6 billion, the company says on its website.

Leonard owns a 1.9 per cent stake in Constellation, worth roughly US$1.21 billion, The Wall Street Journal reported Thursday, citing data compiled by financial data firm FactSet Research Systems Inc.

In the first 10 years after Constellation’s inception, Leonard was “heavily involved” in day-to-day operations and acquisitions, chief financial officer Jamal Baksh told Financial Post Friday. But in recent years, Leonard’s focus as president was on strategy, such as the potential of investing outside of vertical market software, Baksh said.

“Mark’s a brilliant guy,” he added. “He still will be associated with the company, and if he’s still on the board … I don’t think we necessarily lose anything because the core day-to-day stuff he was doing can be replaced, and it’s his mind and his vision that we still have access to.”

Constellation management told Financial Post that Leonard made the decision to step down as president due to a “serious” health issue.

What is Constellation Software?

Constellation, based in Toronto, is known for acquiring, managing and building small vertical market software (VMS) companies, which provide industry-specific services, such as for health care, utilities and retail. It has more than 125,000 customers in more than 100 countries, according to the company’s website.

Constellation has returned nearly 30,000 per cent since it went public in 2006, including dividends, compared with the roughly 670 per cent return of the technology portion of the S&P/TSX Composite index,

Bloomberg reported

.

In 2021, Leonard said in a letter to shareholders that Constellation (which, up until that point, had made only three large VMS purchases in its 26-year history) would be building a small, dedicated team to focus on pursuing larger acquisitions as well.

However, the company still mainly focuses on adding smaller businesses to its roster, Baksh said.

“We are very opportunistic and disciplined on any large acquisitions, and they will be sporadic,” said Baksh. “When I talk to investors, (I say), ‘It’ll be great if we can find some area to invest large amounts of capital outside of VMS, but I wouldn’t count on it.’”

Just a few days before Leonard’s exit was announced, Constellation held a conference call on the impact of

artificial intelligence

on software businesses following a request made by one of the company’s largest shareholders.

Leonard said during the call that it was “difficult to say whether programming is facing a renaissance or a

recession

” and cautioned against making any predictions regarding the future of AI.

Baksh said while some of the market reaction was negative after that call (Constellation’s stock price dipped 4.9 per cent after it), the company believes it has a defensible position, and the impact of AI should end up being a net positive for Constellation overall.

How does the departure affect Constellation?

News of Leonard’s departure caused Constellation’s stock price to nosedive by more than 17 per cent to $3,390 on Thursday, though it picked up on Friday to $3,675.

National Bank analyst Richard Tse downgraded the stock to sector perform from outperform and cut his price target by $1,000 to $4,500.

“While all the operating group heads are equally capable of taking on that role (and execution) – including Mark Miller, who we believe is extremely capable having known him since Constellation’s IPO, none will carry the same (obvious) cachet as Mark Leonard,” Tse wrote in a note to clients.

“It’s that cachet that’s qualitatively added a premium multiple over and above the Company’s consistent execution.”

Bank of Montreal (BMO) Capital Markets analyst Thanos Moschopoulos called Leonard “irreplaceable” in a note to clients following the news of Leonard’s exit as president.

“CSU has had an unparalleled track record under Mr. Leonard’s leadership,” Moschopoulos wrote. “He has been among the most successful software investors of his era.”

Still, Moschopoulos said he believes Leonard’s “strategy, structure and leadership” will soften the impact of his departure and allow the company to sustain its strong growth and exceptional returns on capital.

Who is the new president of Constellation?

The new president, Mark Miller, who is stepping into Leonard’s shoes, co-founded Trapeze Group in 1995, the first company acquired by Constellation.

He is continuing in his roles as executive chairman of Trapeze, as well as Constellation’s Volaris Operating Group, as he serves as president.

Aside from serving as chief operating officer at Constellation, Miller is on the board of Lumine Group, Constellation’s telecom-focused independent division, tech incubator ventureLAB, Calgary-based software technology company Computer Modeling Group and IOVIA, a B.C.-based platform that helps brands identify opportunities in the creator economy.

Miller was also on the board of directors of occupational health and industrial hygiene software leader Medgate Inc. (now known as Cority) and profit and cost simulation software provider Velocity Inc., both headquartered in Toronto.

He began his career as a software developer after earning a Bachelor of Science in statistics and mathematics from McMaster University in Hamilton, Ont. He also attended the executive marketing program at the Ivey Business School at the University of Western Ontario.

Baksh said Miller has worked with Leonard for a long time. He doesn’t foresee Miller making any material changes that would depart from Leonard’s vision, though it is possible his managerial style could be different.

“Any changes will be made from a board perspective,” Baksh said, noting that the company operates in a highly decentralized manner. “You can’t really step on the toes of these individuals that have been here since day one … (they) are extremely good; they’ve generated a ton of wealth.”

Leonard said in Constellation’s press release that he and the board have “complete confidence” in Miller and the executive team to deliver on the company’s business plan.

“Mark Miller has been a trusted adviser and a driving force within Constellation’s executive leadership team for over thirty years and I can think of no one more experienced, knowledgeable and capable to lead the company at this time,” Leonard said.

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• Email: slouis@postmedia.com